For the super-rich, owning a sports team used to be an "ego play."
Now, there is money to be made, and billionaires have been snapping up franchises in everything from the National Football League to professional pickleball.
The latest example came last month, when news broke that venture capitalist Vinod Khosla and his family were buying a controlling stake in the Seattle Seahawks for an eye-popping $9.6 billion, a record for an NFL franchise.
That deal was the third prominent sports ownership transaction in as many months and, in some ways, these investments are nothing new.
Wealthy individuals and families have always been interested in owning sports teams out of passion for the sport and frankly the "ego play" that comes with it, according to Ronald Diamond, chairman of Diamond Wealth, a syndicate of about 130 family offices ranging in size from $250 million to $30 billion.
But families have ramped up their interest in sports investing over the past five-to-seven years to include not only the "big four" leagues -- the NFL, MLB, National Basketball League, and National Hockey League -- but also within women's sports leagues, including basketball and soccer, and emerging leagues for pickleball and volleyball.
Wealthy investors in the U.S. are also pursuing European soccer leagues. the Guardian reported a week ago that Amazon founder Jeff Bezos may join a consortium led by Amit Bhatia, the former co-owner of Queens Park Rangers -- a second-tier U.K. soccer team -- to buy a 30% stake in the Liverpool Football Club, in England's Premier League.
A Bezos representative did not respond to a request for comment.
Though passion and ego may have driven sport investments in the past, today "the economics make sense," Diamond says. That's true even for the big leagues, "as long as you can buy and hold."
"If you invest in the NFL, you will almost for certain, over a 20-year period, make money," he says. "Look out decades -- in baseball, in basketball, football -- most [teams] will make money and outperform the market."
The recent deals included the announcement in June that Walton heir Lukas Walton and his wife, Samantha, agreed to buy a minority stake in the Chicago Bulls and the United Center arena from limited partners for an undisclosed amount.
In May, Clearlake Capital Group co-founder José E. Feliciano and his wife Kwanza Jones, CEO of their family office, agreed to buy a controlling stake in the San Diego Padres from the Seidler family in a deal that values the Padres at about $3.9 billion, a record valuation for a Major League Baseball team.
The Ross-Arctos Sports Franchise Index (RASFI) -- which tracks the performance of the major four North American leagues -- reported a nearly 5% growth in franchise values in the first quarter. For one year, returns are up 16.5% compared with a 20.5% gain for global stocks. Over 10 years, the index returned 16% and over 20 years, 13.1%, compared with returns of 11.9% and 8.2%, respectively, for global stocks.
Though the big men's leagues arguably offer the biggest stage for family investors, even higher returns -- as well as risks -- are likely in emerging leagues and in women's sports, as they have more room to run, according to Nicole Pullen Ross, who leads Goldman Sachs Private Wealth Management's Sports and Entertainment Solutions group.
Earlier in July, the group convened team owners, sports and media investors, founders, and athletes in Manhattan to talk about sports, business, and culture. In a panel discussion, Reddit founder Alexis Ohanian, brought up his own interest in investing in track-and-field.
"There's so much disruption happening," Pullen Ross said in an interview. As with any industry that experiences innovation, investors take notice.
"Whether it's flag football or the Unrivaled League (a women's three-on-three basketball league), or a different way to spotlight athletes at track and field, there's innovation on the horizon, and that's extremely interesting to investors to figure out what that opportunity will look like five years, 10 years down the road," she says.
The fact sports are seen and broadcast live is one of the biggest drivers to the sports boom, because it allow for reaching "consumers in a consistent and reliable way," Pullen Ross says. "Many people have called it the 'anti-AI trade' as one of the reasons we're seeing so much attention here."
When Goldman formed the sports and entertainment group in 2018, investment bankers were spending a lot of time with clients looking at media rights for sports leagues.
"We thought we were at the beginning of a growth story," she says. "We certainly didn't expect the slope of the growth to be as steep as it's been."
Other parts of the sports ecosystem have boomed too, including gaming, streaming, and related real estate.
Most of the families Diamond works with are interested in making direct investments for a majority or minority stake in a team, or in pooling money alongside other families to invest. Goldman similarly finds large family offices most interested in majority or minority stakes.
But an increasing number of private-equity funds are appealing to wealthy investors too, often offering exposure to all aspects of the sports world, including media rights and real estate. Diamond worries that the shorter timelines on these funds and their focus on returns won't benefit teams as much as families, which invest out of a passion for the sport and have a long-term interest in supporting the franchise, the fans, and their own family's legacy.
Any investor in a sports team should go in eyes wide open to the extensive due diligence required, on their part and often on the part of the league they are investing in. Often an investor needs to provide a league with "all the beneficial owners, all of the decision makers" involved in their family network, William Kambas, a partner on the private client and tax team at Withers, said in an interview. They are "looking through who owns and manages different entities and trusts," Kambas says.
Formula One racing, for instance, wants to know who all the owners are so they know one person doesn't have stakes in two teams that are competing against each other, he says.
"And you don't want criminals or people with inappropriate backgrounds or inadequate financial backgrounds to then become owners in the league because it could jeopardize an entire team," Kambas says.
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